Spotlight: The big challenges facing Chile’s fast-growing NCRE sector

Bnamericas Published: Monday, January 09, 2023
Spotlight: The big challenges facing Chile’s fast-growing NCRE sector

Building out transmission infrastructure, overhauling generator remuneration regimes and other areas, harmonizing territorial management rules and tackling the issue of power dumping as soon as possible.

Those are challenges facing Chile’s non-conventional renewable energy (NCRE) sector, industry chamber Acera’s annual conference was told.

Investor-friendly Chile has been powering ahead, smashing clean energy generation targets, but action is needed to ensure the pace is maintained over the coming years as the country works to achieve carbon neutrality by 2050.

“We’re at an inflection point, a key moment in our energy transition,” Acera president Jaime Toledo said.

Toledo underscored the achievements of NCRE players – chiefly ramping up generation share to 33% in 2022 from just 5.9% in 2013 – but said the sector cannot rest on its laurels.

Public-private collaboration is key along with acknowledgement that the energy transition “is more complex than originally thought,” Toledo said.


To support continued renewables growth and, in turn, the energy transition, Chile needs to build out not just transmission and storage but also distribution infrastructure. “Where we have territory, where we have resources to generate clean energy, what we have to do is bring transmission lines,” Toledo said.

A chief factor is a scheme underway to retire some 5.5GW of coal-fired capacity which will require around 22.5GW of renewables and storage that, in turn, will necessitate new power lines, the conference was told.

While much emphasis has been placed on challenges in the sundrenched north, outlay is also needed further south, where wind tends to play the main role.

“In the south we’re already seeing high levels of dumping, congestion and zero marginal costs,” said Toledo, citing the impact of developers, chief among them wind, carrying out projects there because of dispatch restrictions in the north. 

Incorporating some 6.0GW of renewables capacity currently under construction will constitute a challenge, the conference was told. 

“This is obviously going to require a major effort to be able to integrate it into the system, precisely with respect to transmission challenges and flexibility of the national electricity system,” Acera executive director Ana Lía Rojas said.

A major north-south power line, Kimal-Lo Aguirre, is expected to enter service by around 2030 to ease congestion, but there is industry consensus that the project alone is not a panacea, that more lines and storage are needed.

Energy minister Diego Pardow previously said an associated transmission bill would be submitted this year. Grid planning may be among the pillars. 


The current generator remuneration system is decades old, introduced before the major incursion of NCRE technologies, which often attract zero marginal costs.

Citing the number of hours with associated marginal costs of zero last year – 1,919 at the northern Crucero node alone – Acera said this impacts the financials of plants and urged a rules review. A typical solar plant in the north has around 3,000 generation hours.

This year should see discussion on remuneration mechanisms in the wholesale power market. “It is important that this starts sooner rather than later,” Rojas said, citing the associated issue of dispatch restrictions. 

“We need to find a formula to modify the rates system,” said Toledo, adding this work was critical to maintain the attractiveness of the renewables sector among investors. He said that not just Chile is facing this challenge but also other countries with high renewables penetration. 

Proposed new capacity remuneration rules also need working on, the conference was told. The draft rules assign higher rates for storage systems, which is to be welcomed, Toledo said. But, to compensate, rates assigned to solar plants would be reduced, tarnishing the attractiveness of the segment, where Chile is a global heavyweight. 

Chile recently introduced a law that opens the door for remuneration for injection and capacity provided by standalone storage plants. Secondary legislation guiding its implement is due by end-November.


Acera has launched a process to contract a consultancy to conduct an analysis of territorial management rules in Chile, with one associated goal helping achieve regulatory harmonization. 

Ensuring projects do not generate fallout for communities, and are carried out smoothly, is vital to achieving an effective energy transition, the conference was told. 

“To be able to continue with the development of renewable energy, it needs to be very clear – and to be established – in what territories we’re going to be able to develop renewables projects … closely aligned with the interests of the local communities and with strict compliance with environmental standards.”

The energy ministry sought funds for associated work in its 2023 budget request.

Territorial planning is seen as vital to green hydrogen development, particularly in southern Magallanes region, where multiple megawatt-scale projects are planned.


Officials referred to dispatch restrictions stemming from a strained grid which, in turn, has caused short-term market payment stress for at least two generators.

“One of the most worrying challenges we have at the moment is the increase in dumping, cuts in clean, cheap, renewable energy that can’t enter the system for different reasons associated with a lack of transmission, congestion and also a lack of flexibility of the national electricity park,” Rojas said.

A record 1.47TWh of solar and wind output was dumped or cut in 2022, the highest on record and up 225% compared with 2021.

Citing the new projects being built, Rojas said expansion of the generation park would aggravate even more the issue of energy dumping. Acera said proposed remedial measures – compiled following a public-private working group – would not tackle the situation with sufficient urgency or depth. 

“We’re quite worried, disillusioned, with measures announced by the authorities,” said Toledo, adding that they did not adequately address the issue of transmission shortfalls.  

National energy commission CNE, which has been working with the private sector to diagnose and remedy the problem, recently published an action plan and said work would not stop.


Accumulated investment

Accumulated NCRE investment in Chile is US$16.8bn, with solar PV accounting for the biggest chunk, US$6.48bn, followed by wind (US$5.4bn). Associated installed capacity is 13.8GW.

Record year

Last year’s headline NCRE generation share of 33% constitutes a record. 

Renewables coverage spiked to an all-time high of 71.3% at 13:00 on October 12, “a phenomenal feat,” Rojas said. In addition, in 83% of days, coverage spiked at over 50%.

In a related first, wind and solar farms together (27.7%) generated more electricity than coal-fired plants (23.3%) over a 12-month period.

Last year also saw developers bring 155 NCRE and storage projects, for 3.95GW, online, led by solar PV, followed by wind. Around 41% of this in the testing phase.

Just under 450 NCRE and storage projects are in construction, with associated capacity and outlay of around 6.0GW and US$5.6bn. 

Installed capacity

Installed capacity stood at 33.3GW in December, with NCRE accounting for 13.8GW, thermoelectric 12.7GW and conventional hydropower 6.78GW.

Northern regions Antofagasta and Atacama are home to the biggest blocks of capacity, of 3.94GW and 3.46GW, with solar dominating. 


In 2013, the average price awarded in supply auctions was US$129/MWh, compared with US$24/MWh in 2021. 

Nevertheless, amid a confluence of factors including higher materials costs and concerns over dispatch restrictions, the downward trend came to an abrupt halt last year. Just 15% of electricity offered was awarded in the last supply auction. New auctions are in the pipeline.

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